Open AccessA Stochastic Model for Stock Market Price Variation
Author(s) -
D. S. A. Wokoma,
I. U. Amadi,
I. S. Aboko
Publication year - 2022
Publication title -
asian research journal of mathematics
Language(s) - English
Resource type - Journals
ISSN - 2456-477X
DOI - 10.9734/arjom/2022/v18i430372
Subject(s) - stochastic differential equation , principal component analysis , econometrics , volatility (finance) , mathematics , differential equation , stochastic modelling , stochastic volatility , economics , statistics , mathematical analysis
This paper develops a differential equation model that could consider environmental effects for decision making and incorporated stochastic parameter in the model. These analyses were logically extended to vector stochastic differential equation that would help in predicting different commodity price processes, and the result obtained by using principal component analysis which is a function of the drift and by imposing a condition on the stochastic part. Furthermore, the results show the level of proportion accounted by first Principal Component Analysis (PCA) a function of the drift. In the circumstance,Kolmogorov-Smirnov (KS) test was carried out; and there exist a difference between distributions of volatility and drift.